Lockheed Martin Q3 2021 Earnings Call Transcript

Quartr
Provided by Quartr
October 25, 2021

There are 14 speakers on the call.

Operator

Day, and welcome everyone to the Lockheed Martin Third Quarter 2021 Earnings Results Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Greg Gardner, Vice President of Investor Relations. Please go ahead, sir.

Speaker 1

Thank you, John, and good morning. I'd like to welcome everyone to our Q3 2021 earnings conference call. Joining me today on the call are Jim Taiclet, our Chairman, President and Chief Executive Officer and John Mahler, our Acting Chief Financial Officer. Statements made in today's call that are not historical fact call are considered forward looking statements and are made pursuant to the Safe Harbor provisions of federal securities law. Actual results may differ materially from those projected call is in the forward looking statements.

Speaker 1

Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward looking statements. We have posted charts on our website today that we plan to address during the call to supplement our comments. Call will be available on our Investor Relations website at www call.lockymartin.com and click on the Investor Relations link to view and follow the charts. With that, I'd like to turn the call over to Jim.

Speaker 2

Thanks, Greg. Good morning, everyone, and thank you for joining us today on our Q3 2021 earnings call. In a few moments, John will provide a detailed review of our quarterly results, updated 2021 guidance and trending information for 2022. Call is open. But first, I will provide a 5 year sales outlook and discuss our plans for accelerating capabilities to our customers and driving per share value to our shareholders call over that time horizon.

Speaker 2

Last month, I led our executive leadership team as we completed our annual strategic and financial planning process. Call is now open. Given the scope of changes in our operating environment over the past year, we conducted a more in-depth and extended assessment of our financial forecast. Based on these strategic and financial reviews and the information available to us today, our current expectation is that sales call in 2022 will decline slightly from our expected 2021 sales level. We then anticipate sales will increase slightly call is being recorded in 2023 with steadily increasing sales growth through 2026.

Speaker 2

Call is now open. This sales trajectory reflects a number of factors, including the continuing effects of the ongoing COVID pandemic call is being recorded and extended delivery time lines across our supply chain, moderating growth rates in the U. S. Defense budget, call is now available to our Chief Financial Officer, and our recent initiatives driven by recent events such as the withdrawal of U. S.

Speaker 2

Forces from Afghanistan and the renationalization of the AWE program in the U. Call and our recently completed agreement with the F-thirty 5 Joint Program Office on a rebaselining of aircraft deliveries under our production program. Call is now open. I'll address this significant agreement a little later in my remarks. As with all forward projections, our performance on current programs, call is our ability to win highly competitive new starts, the size of future defense budgets and the global geopolitical landscape will all influence our ultimate growth rate

Speaker 3

call over the coming 5 years.

Speaker 2

But as we look ahead, there are 4 primary areas that underpin our longer term growth forecast. Call will be available on our 2019 guidance. The first of these future growth areas

Speaker 3

is within our hypersonics portfolio.

Speaker 2

We are currently performing on 6 hypersonic programs across the company call is now open. And following the successful completion of ongoing testing and evaluation activity, multiple programs are expected to enter production call between 20232026. The second growth area is within our classified activity. 3 of our 4 business areas are engaged in significant classified development programs. Impending successful achievement of the objectives within those programs, call is now open.

Speaker 2

We expect to begin the transition from development to production again between 2023 2026. Call is now open. The 3rd area of expected growth lies in our current programs of record. Our portfolio is very well aligned with our customers' mission requirements. Call is now open.

Speaker 2

And as a result, we have multiple programs from each business area entering growth stages. This includes the CH-fifty 3 ks heavy lift helicopter, F-thirty five sustainment activity, increased PAC-three production rates and the modernization and enhancements to the fleet ballistic missile. And finally, we're in competition for several significant new business awards, including the Future Vertical Lift, Q1 and FARA competitions, the Next Generation Interceptor Program and the KCY Tanker Program. Call is now open. These represent meaningful opportunities to accelerate our projected top line growth profile with new long term projects call that are critical to our national defense.

Speaker 2

Now I'd like to discuss our strategy for driving strong returns for our shareholders in the near term, call, while remaining well positioned for our expected return to growth in 2023. The central tenet of our value creation strategy is using plan and dynamic capital allocation process. We will first reinvest capital into our business to meet our customers' requirements and drive organic growth. Call is now open. Currently, we will continue pursuing actionable inorganic growth opportunities that strengthen our core business.

Speaker 2

Call is now open. And we will return cash to shareholders through increasing dividend payments and a significantly expanded share repurchase program. Call is now open to the call to questions. To drive sustainable organic growth, we will continue making significant investments in our business area. These investments include nearly $2,000,000,000 of annual capital expenditures and approximately $1,500,000,000 in independent research and development spending each year.

Speaker 2

Call is being made in our signature platforms and systems to provide our customers with the high value solutions they're going to need call is to execute their missions of deterring, if necessary, defeating the pacing threats across all the domains of operation. Call is now open. Additionally, we are transforming our internal operations with a model based engineering and enterprise architecture, call is now open to the call and we are building digital factories of the future. These investments in state of the art engineering, manufacturing and sustainment tools and techniques call will ensure our business areas can continue delivering outstanding performance levels on current programs, while also positioning us to prevail in upcoming campaigns. After making these significant investments in our business to support our customers and drive organic growth, call is now open.

Speaker 2

We expect to have substantial free cash flows available to return to you, the shareholders, through dividends and share repurchases. Last month, the Board increased our quarterly dividend by $0.20 or approximately 8% call is now $2.80 per share and now $11.20 per share annually, providing shareholders, especially our yield investors call was strong returns. This action marks the 20th consecutive year that the Board has increased Lockheed Martin's quarterly dividend. Along with making an increased quarterly dividend payment, we will also provide additional value to shareholders by returning excess cash to them call through a greatly expanded share repurchase program. As discussed in today's press release, we've already repurchased $2,000,000,000 of our shares

Speaker 3

call for the 1st 3 quarters of 2021.

Speaker 2

And last month, on my recommendation, the Board increased our remaining share repurchase authority call by $5,000,000,000 bringing our current total share repurchase authority to approximately $6,000,000,000 With our stock trading at a level well below what we calculate as the company's intrinsic value, we have significantly increased our planned share buybacks, call is today's call, and I anticipate that we will repurchase up to $6,000,000,000 of our shares over the next 12, 18 months, if conditions warrant.

Speaker 3

Call is

Speaker 2

now open. As a final note on shareholder value, we are going to dynamically allocate capital to the highest return opportunities, call is prioritizing investments that lead to growing free cash flow per share. That's our new metric. We will remain opportunistic and pursuing accretive bolt on acquisitions, evaluate additional increases to our current share repurchase authorization call is now open and continue to reinvest capital into our business to drive long term growth. We have the balance sheet flexibility and firepower call to pursue multiple avenues of growth, while returning significant capital to our shareholders.

Speaker 2

We built this balance sheet to use it and we will do so, call is consistent with our focus on long term shareholder value creation. Our strong balance sheet provides us with ability to close on the Aerojet Rocketdyne transaction, provide robust returns to shareholders and continue to invest in our portfolio to support our customers call will be recorded and drive future growth. The IRRJET Rocketdyne transaction continues moving through the regulatory approval process call is now open. And we now anticipate closing in the Q1 of 2022. Before I turn the call over to John, I'd like to highlight the efforts of entire F-thirty five organization, including the government's Joint Program Office, our teammates and suppliers, call today's call.

Speaker 2

Our Aeronautics organization and our international partners for establishing a new aircraft production baseline delivery profile that will provide industry, government, partner countries and FMS customers as well as you, the investor community, call with important visibility well into the future. The program is strong and stable, and we have opportunities ahead of us to add to that strength. Call is now open. The program has delivered over 700 production aircraft out of a plan of record of over 3,300 jets, call, including to all 3 U. S.

Speaker 2

Services and 9 international customers so far, and we look forward to continuing the successful program for decades to come. With that, I'll turn the call over to John and I'll rejoin you to answer your questions.

Speaker 4

Call is now open. Thanks, Jim, and good morning, everyone. As I highlight our results, please follow along with the web charts we have included with our earnings release today. Call is now open. Let's begin with Chart 3 and an overview of 3rd quarter activity.

Speaker 4

Starting with sales, we reported revenue of $16,000,000,000 This result was below our expectation as we realized larger than anticipated supply chain impacts across aeronautics, call to our Chief Financial

Speaker 3

Officer of Businesses and Fire Control

Speaker 4

and Space. These impacts span multiple suppliers and our expectation

Speaker 3

call is that we will

Speaker 4

incrementally recover from these disruptions over the next 12 to 18 months. Call is now open. Despite this reduction in sales volume, our segment operating profit increased year over year to $1,900,000,000 call is now on strong operational performance across the enterprise. Our earnings per share of $2.21 included a non cash charge call is now available to our previously announced pension transaction. Call is now open.

Speaker 4

We generated $1,900,000,000 in cash from operations and continued our practice of accelerating payments to our supply chain call with $1,500,000,000 in accelerated payments at quarter end. The supply chain disruptions we experienced during the Q3 call will underscore the fact that many of our suppliers are still dealing with the financial stress caused by the global pandemic. Call is being recorded. In addition, we continue to return substantial amounts of capital to our shareholders through both dividend payments and share repurchase activity. And we have provided trending data for 2022, which we will discuss further in a few minutes.

Speaker 4

Turning to Chart 4, we compare our sales and segment operating profit this year with last year's results. Call is now open. As we noted in our earnings release, our 3rd quarter sales are below 2020 levels, primarily because of the renationalization call of the Atomic Weapons Establishment Program in our Space Business Area. Our 3rd quarter sales also reflect recent supply chain delays, most notably on the F-thirty five production activity and on several production programs call within both missiles and fire control and space. Despite this reduction in sales volume, our 3rd quarter segment operating profit is up from last call is being recorded as strong operational performance resulted in significant risk retirements across all four business areas.

Speaker 4

Call is now open. Chart 5 shows our earnings per share for the quarter. Our earnings per share of $2.21 incorporates a $4.72 non cash charge associated with the $4,900,000,000 pension liability transfer we completed back in August. Call is now open. On an adjusted basis, our pre transaction earnings per share of $6.93 was 11% higher than our 2020 results call is due to improved segment operating margins, reduced share count and another quarter of mark to market gains across our Lockheed Martin Ventures portfolio.

Speaker 4

Call is now open. While future volatility associated with investments in early stage companies is expected, the significant gains realized across multiple holdings in our ventures portfolio reinforce the value of investing in and partnering with company is focused on cutting edge technologies. On Chart 6, we will look at our year to date cash generation and deployment. Call is now open. Subtracting our capital expenditures from almost $5,000,000,000 of cash from operations, our year to date free cash flow is greater than $4,000,000,000 call is now open.

Speaker 4

We've repurchased $2,000,000,000 of shares year to date, including $500,000,000 during the 3rd quarter call and have made more than $2,000,000,000 in dividend payments. In total, our balanced cash deployment of nearly 4 point $2,000,000,000 represents over 100 percent of free cash flow returned to our shareholders year to date. Call is now open. And we will continue these shareholder friendly actions going forward as evidenced by our recent dividend increase and share repurchase program announcements. Call is now open.

Speaker 4

Moving on to Chart 7 and our 2021 guidance update. We've lowered our 2021 outlook for sales and segment operating profit call is to reflect the previously discussed supply chain impacts that emerged in August September. We've reduced outlook for cash from operations primarily to reflect our updated plan to maintain our current $1,500,000,000 level of accelerated call to our supply chain. We plan to continue supporting our suppliers as they recover from pandemic related impacts, call is expected to be recorded in the Q1 of 2019, especially small and medium businesses both across the country and internationally to help maintain program schedules and customer missions. Call is being recorded.

Speaker 4

The full year outlook for earnings per share has increased $0.35 from the midpoint of last quarter's range, call was driven by Lockheed Martin Ventures investment gains and several non operational items. Conference call is now turning to Chart 8, we take a closer look at the current year revisions to 2021 sales by business area. Call is being recorded. As discussed, Aeronautics, Missiles and Fire Control and Space have all been affected by lower than anticipated activity call is coming through our supply chain. The level of reduction in supply chain activity over the past 2 months is higher than what we've been experience since the beginning of the pandemic and our 2021 sales outlook assumes that we will see a return to more normal activity levels call in the Q4.

Speaker 4

In addition, our sales outlook for 2021 and our trending information for 2022 call excludes any potential impacts associated with the recent executive order on safety protocols for federal contractors. Call is being recorded. On Chart 9, we see segment operating profit tracking with a reduction in expected sales volume call is now open. And our expected segment operating margin outlook remains at 11%. On Chart 10, we take a closer look at our initial trending information for 2022.

Speaker 4

We've estimated 2022 sales at approximately $66,000,000,000 call will be a decline of 1.5 percent from our projected 2021 results. As a reminder, the renationalization of our work in support of the United Kingdom's atomic weapons establishment earlier this year creates a headwind of just under $900,000,000 on a year over year basis. Call is now open. We are expecting segment operating margins to remain at approximately 11%, and we are projecting growth in cash from operations quarterly earnings call is expected to be approximately $1,000,000,000 This outlook assumes there will be no increase call is being recorded and tax payments related to capitalizing R and D costs. If current legislation is not amended,

Speaker 3

call today's call.

Speaker 4

Our cash from operations outlook could be reduced by up to $2,000,000,000 call is now open. Also, given we continue experiencing impacts across our supply chain, we now anticipate maintaining accelerated payments at the current $1,500,000,000 level through year end 2022. Our prior multiyear cash forecast assumed there would no longer be a need to accelerate payments to our supply chain beyond 2021.

Speaker 3

Call is now open.

Speaker 4

We are currently assuming a statutory corporate tax rate of 21%, and we have not included financial projections associated with closing the Aerojet Rocketdyne acquisition, which as Jim mentioned is now expected to occur during the first quarter of 2022, subject to required regulatory approval. Turning to pension related assumptions, interest rates have increased since year end 2020. Our year to date actual returns have been higher than previously expected, call is now open. And we've lowered our long term rate of return to 6.5%. And in response to investors asking for additional information on pension trends, call is now open.

Speaker 4

We have included 2 charts on this topic in the appendix. These trends include no required pension contributions through 2025 based on current assumptions. On Chart 11, we outline our expected capital deployment activities for 2022. Call is now open. We anticipate spending approximately $2,000,000,000 on capital projects next year, which represents an increase of approximately $300,000,000 over expected Q1 levels.

Speaker 4

In addition, we anticipate investing approximately $1,500,000,000 on independent research and development activities, call, which represents a $200,000,000 increase over planned 2021 levels. These investments are being made to enhance call is our delivery of critical systems and products to our customers as they execute their national security missions, call, while ensuring we are well positioned to compete for new business opportunities. We will be making over $3,000,000,000 in dividend payments call is being recorded today based on a recently announced $0.20 per share increase to our quarterly dividend rate. And as Jim shared earlier, we will also continue to strategically buy back shares when we believe they are trading below intrinsic value as they are now. Call is now open.

Speaker 4

We are planning to opportunistically repurchase up to $6,000,000,000 in shares over the next 12 to 18 months. Call is now open. We are confident we have the balance sheet flexibility and firepower to pursue all avenues of growth while returning significant capital to our shareholders. Call is now open. On Chart 12, we provide some additional detail on our expected long term trajectory for F-thirty five sales.

Speaker 4

Call is now open. As Jim commented earlier, we recently reached agreement with the joint program office on our expected F-thirty five delivery plan. Call is now open. This joint plan represents the best intersection of production operations and supply chain capabilities, technology insertion in report of increasing mission requirements and both the timing and quantity of anticipated new production aircraft award decisions. Call is now open.

Speaker 4

We're very pleased with the outcome of this joint production replan as it provides stability and predictability across all key elements of this program. Deliveries are expected to grow to 156 aircraft by 2023 and will remain at that level for the foreseeable future. We

Speaker 3

call is now open. We are projecting F-thirty five

Speaker 4

production sales in 2022 will be lower than 2021 levels and sales will also decline slightly in 2023.

Speaker 3

Call is

Speaker 4

being recorded. Revenues are expected to remain around 2023 levels throughout the balance of the forecasted timeframe. As we've previously discussed, call

Speaker 3

is now open. The growth in

Speaker 4

F-thirty five sales volume will primarily be driven by sustainment activity as the number of deployed aircraft and associated flight hours grows rapidly, call, while we continue to aggressively pursue cost takeout in partnership with our customer. Finally, we are also

Speaker 3

call

Speaker 4

for our unrivaled 5th generation aircraft. To conclude, on Chart 14, we have our summary. Call is now open. We've reduced our 2021 outlook based on the higher than expected supply chain impacts we experienced during the Q3. Call will be available on our Investor Relations website.

Speaker 3

The supply chain and related

Speaker 4

production impacts along with our updated F-thirty five production plan and the other factors Jim mentioned call has shaped our outlook for 2022 and our future expectations. Our strong balance sheet and cash generation give us multiple options to employee cash and to echo Jim, we will prioritize investments which will grow free cash flow per share. Call is now open. And with our broad portfolio, dedicated employees, strong balance sheet and a disciplined and dynamic capital allocation strategy,

Speaker 3

call is now open. We remain focused on

Speaker 4

our customers' mission and long term value creation for our shareholders. With that, John, we're ready to begin the Q and A.

Operator

Call is now open. You may withdraw your question at any time by repeating the 1 0 command. If you're using a speakerphone, please pick up the handset before pressing the numbers. And first, in line of Rich Safran with Seaport Global Securities. Please go ahead.

Speaker 5

Jim, John, Greg, good morning. Jim, John, I have a 2 part question call is on your 2022 guide, your long term cash flow guide and some of your opening remarks. What's the baseline budget that you're assuming in your guide? And specifically, if the plus ups to the President's request from HASC And SaaS per included, did that imply some upside to your 2022 guide? Or is it just too late for fiscal 2022 funding to have an impact?

Speaker 5

And the second part to my question is, so you lowered your cash from operations guide for 2022. I want to know if you discuss a bit more about what you think cash flow looks like beyond 2022 and what you're assuming along with that? Thanks.

Speaker 4

Call is now open. Yes. Thanks, Rich. It's John. I'll take both parts of that 2 part question.

Speaker 4

So first, in regards question comes from the line of John fiscal year 2022 and the trending information we've given you. I'd say we're encouraged by the direction of the various committee markups as they reflect really good support for a number of our programs. And to your question about how much if any of this will come through in 2022, The answer to that question is going to be based on how much incremental funding is actually appropriated, How long it takes for that appropriated funding to end up getting on contract with us and us slowing that down to our supply chain. And then the third factor is what specific programs, the incremental appropriations are applied to. It's easier call is obviously to maintain programs at current run rates than it is to accelerate programs.

Speaker 4

So any programs that we're planning Sort of a trend down would be really good candidates for being able to see opportunities in 2022 call is related to increased appropriations. I'll kind of finish this section by saying, obviously, by the time we're In January, when we've given you an updated outlook for 2022, we should have a lot more clarity in and around the budgetary trends. Now turning to your the second part, which had to do with we'd previously given multiyear cash operating cash flow guidance and of course all these metrics are going to be assuming the R and D tax change does not go into effect. Our prior guidance was like 8.9%, 9.1%. You've seen We've got our guidance now at 8.3% for this year and 8.4% for next year.

Speaker 4

And I'll say we anticipate higher than 8.4% operating cash flow guidance

Speaker 3

call is now open. As we look ahead

Speaker 4

to 2023, but really the only factor that's changed since the multiyear guidance we gave before Is in the level and the duration of the accelerated payments we're planning to make to our supply chain. So I think I mentioned in the script, we have previously in that 8, 9,991 track assumed we would be accelerating $1,200,000,000 worth of accelerated payments to the supply chain at year end at the end of this year, but then the assumption was the pandemic would be behind us in 2022. Call is being recorded. We'd unwind that program. We'd end 2022 with no accelerated payments being made through our supply chain.

Speaker 4

Call is now open. Our current forecast, the 8.3 and 8.4 assumes we're at $1,500,000,000 of accelerated payments at the end of this year call is $1,500,000,000 of accelerated payments at the end of 2022. So if the pandemic impacts are behind us call is now open. Before we end year end 2022, our guide of A-four would increase by that $1,500,000,000

Speaker 2

Thank you. You're welcome, Rich.

Operator

Our next question is from Rob Stallard with Vertical Research. Please go ahead.

Speaker 6

Thanks so much. Good morning.

Speaker 4

Good morning, Brad.

Speaker 7

Jim, just a quick question and clarification on your 5 year sales outlook. Did you say you expected sales growth to accelerate after 2023? And then secondly, the question, what are your expectations for operating margins over this period? Thank you.

Speaker 2

I'll speak to growth, Rob, and Make a point on operating margin that John can pick up on. So yes, based on hypersonic's classified programs, programs of record like CH-fifty 3 ks and others, We do believe that we'll have a rebound to meaningful growth in 2023 and beyond. But again, that's also dependent on a number of factors, including the budget, etcetera, that we've just talked about. So yes, that is the idea. And frankly, We want to use this year or 2 period to accelerate share repurchase, reduce the count.

Speaker 2

So when that inflection point does come on growth. You will have as shareholders basically an amplified benefit during that latter period, if So we fully expect that with margins being pretty steady along the way, right, John?

Speaker 4

Yes, absolutely. So Rob, I mean just to kind of foot stomp What Jim was saying to give a little color, the 4 categories that Jim mentioned in his scripted remarks, Hypersonics, Classified, Growth and Programs of Record and Competitive New Starts. When I look at that subset of revenue call for those 4 categories in 2021 is sort of in the neighborhood of $17,000,000,000 call is being recorded. Over the period going out through for the next 5 years, that set of activity, assuming we hit our operational marks, assuming call is being recorded. These programs continue on their programs of record and we win our share of these competitive new business opportunities that we've talked about.

Speaker 4

That $17,000,000,000 worth of program revenue today will grow at about a 9% compound annual growth rate, which Gives me some level of comfort that the longer term trends that Jim has talked about will hold. Just to reiterate, We're expecting a slight decline in 2022, a bounce back in 2023. And then I would say increasing growth and increasing growth rates Going forward. Now, yes, on the topic of margins, I think 11% is a good working target for us given the evolution in our portfolio and the activity that we see going forward, I just highlighted the 4 categories That we'll be seeing growth. A lot of those are new start programs.

Speaker 4

There is going to be some growth in programs of record, which we would Hope to turn into accretive margin programs, but there is a lot of growth in new start areas, developmental areas. The good news is we will get there'll be cost reimbursable contracts, we'll have assurance of recovery of the costs we're incurring, but they call by definition will be lower margin activities moving forward. And I should mention, and this is just to get this on the record early, There are certain classified activities that we can't talk about, but if those programs Continue to progress along the track that they're on. My expectation is we will be making investments in some of those programs out in the 2023, 2024, 2025 timeframe that will be dilutive to margins. But I think in balance on 11% operating margin is a good metric for us.

Operator

Our next question is from Mike Maudry with Wolfe Research. Please go ahead.

Speaker 2

Hey, good morning. Thank you for the time. So following on Rob's question, and you gave us the 4 priorities that underpin the growth forecast. But Jim or John, can you get more specific and sort of quantify these buckets, how they translate revenue and feather into your outlook beyond 2022 for return to growth. And then separately, what headwinds are you anticipating to offset these growth buckets?

Speaker 4

Yes, sure. Mike, it's John. I'll take it and I'll talk thematically first through the 4 buckets and growth over time. And then maybe now It's good a time as any to talk specifically about sort of what we're seeing moving from 2021 to 2022 and the headwinds. But The 4 big buckets, the first one is hypersonic activity.

Speaker 4

Today, we're doing about $1,500,000,000 worth of revenue in that area. If we are able to move a number of those activities into a From development into production, which we fully expect will happen, we're making great progress on a number of them that are visible and are being reported on today. But Our projection would be assuming a number of those activities proceed into a production environment, that $1,500,000,000 could grow as high as $3,000,000,000 by 2026. The second area, classified in I'll say upfront, we hesitated even highlighting this given there's not a lot that we can say in general about classified activity. But because it is a large and growing component of our business, we thought it was important to at least give you top level trend information and because like I said, we will be making investments in some of this activity downstream, which will have dilutive impacts, thought it was a good idea to talk about.

Speaker 4

But in aggregate, our classified portfolio will grow, we expect, at a rate above 5%. So That is a strong growing area for us. The programs of record, which as Jim ticked through some of The big ones he mentioned will be CH-fifty 3 ks, F-thirty 5 sustainment, the PAC-three program and an additional growth in the fleet ballistic missile and evolutions and new advances in that program, that portfolio today is worth about $8,500,000,000 When we project out to 2026, over that period of time, the compound annual growth rate in that program set call is like 8%, and it's highlighted by CH-fifty 3 ks, where we will be delivering out to a program a record of 200 units. I think the final deliveries are made in 2,032. But just keeping that program on its program of record call will go a long way towards us achieving that growth in the program of record CAGR that I just talked about.

Speaker 4

And then the final area is the new business, Which are a set of sort of wildcards. You're going to get binary decisions in and around the FLORA competition or the FLORA competition. One of the new business areas that Jim talked about is next generation interceptor. We successfully moved into a down select where there's Ourselves and one other competitor, we're making great progress. We've achieved a number of important program milestones recently.

Speaker 4

We feel good about where we're heading. But that will be a down select. And then sort of the wildcard in the bunch and an opportunity we're very excited about call is the KCY Tanker Program, where we've announced that we will be teaming with Airbus, who we think has a very capable frame for doing this mission, I think we bring extensive experience in the mission capabilities That would go on to that airframe. I think we make a very formidable team. We're very excited about that opportunity.

Speaker 4

And depending on outcomes, I mean, obviously, as we're doing next to nothing in either any of those programs besides the next generation interceptor, Yes. That growth rate could be explosive. If we prevail on FLORA and FARA, which we think we're very well positioned And the headwinds, I guess, like I said, now let's tactically kind of walk through the 2021 outlook of roughly $67,000,000,000 and how that translates as we look ahead 2020 2, obviously, you look at the math and we're down about $1,000,000,000 The obvious large year to year headwind is related to the AWE renationalization, which I believe either Jim or I talked about in script is being a headwind of just under $900,000,000 The second headwind you'll see on our F-thirty five revenue chart, call is now expected to be recorded in

Speaker 3

the Q1 2020. We're projecting a decrease in F-thirty

Speaker 4

five production related revenue of about $400,000,000 moving from 2021 to 2022. And then we have 2 programs that are sort of in their natural life cycle evolution, very successful programs, but they've delivered out, and that's the Black Hawk helicopter program. And by delivered out, I mean, it's on the it's moving down from the peak. The number of helicopters we're going to deliver this year will be cut in half by the time we're 2 years out. And then our highly successful next generation OPIR program.

Speaker 4

Both of those programs moving from 2021 to 2022, if you combine the downtick in revenue at aggregates to about $600,000,000 And then, one of the other external factors was the recently announced and executed withdrawal of the U. S. Military presence in Afghanistan. The primary impact to us is in a contract, a special ops logistics support program. We had some other Afghan drawdown related impacts, in total, it's about a $200,000,000 year over year headwind.

Speaker 4

But now as I pivot To the plus side, one of the programs that's ramping up year over year is one of those in the I'd call it competitive category that we talked about. It's the next generation interceptor, where we're doing about 2 We have a lot of growth, as we mentioned, within our classified activity. A lot of that activity is being done in our Skunk Works organization within Aeronautics, that work is going to be growing about $400,000,000 year over year. And the final large program of record growth is in the CH-53K heavy lift where we'd expect to see $300,000,000 year over year growth. On balance, it's down.

Speaker 4

The headwind is removal of the AWE activity we were doing.

Operator

Our next question is from George Shapiro with Shapiro Research. Please go ahead.

Speaker 8

Yes. Just to follow-up on your comments on the sectors. First, AWE, a $900,000,000 hit, I thought that program had been running more like $3,000,000 or $350,000,000 a quarter. And obviously, it's really only the first half that overlaps for 2021 to 2022. So if you could comment on that.

Speaker 8

And then if you looked at each of the sectors there, I would think that the aeronautics would be down maybe $1,000,000,000 $1,500,000,000 but you get Some growth in RMS, you get some growth in space ex the AWE. So if you could just kind of comment on that status.

Speaker 4

Yes. Sure, George. Thanks for the question. If you go back to like our first and second quarter press releases and we probably have it in the year to date, AWE first quarter activity this year was 4 $40,000,000 AWE activity in the 2nd quarter was $435,000,000 You saw those 2, you get the $875,000,000 level of activity we saw, probably higher than what you might have remembered because you had a lot of wrap up associated activity that took place. But $875,000,000 in 2021 that won't recur.

Speaker 4

And maybe what I'll do is do a high level Sort of around the horn of how those the headwinds and tailwinds play out by segment. I The first segment we talked about was Aeronautics. As we look ahead to 2022, we're expecting low single digit growth rates in Aeronautics With a slight increase in margins, think of in the 10 basis points, 20 basis point range. Within missiles and fire control, we're actually expecting a slight decline, although think of it as a low single digit decline with margins slightly lower than 2021 levels at again 10 to 20 basis points. If you go to RMS, we're expecting a low single digit decline as well, with margins maybe up to 40 basis points call is below what we're going to end up with in 2021.

Speaker 4

And then finally, at Space, we're expecting mid single digit declines. Obviously,

Speaker 2

Yes, George, it's Jim. Just to give you a little more color on just pick 1 RMS, right? So John already mentioned the black Hawk is going to be down year to year and the CH-fifty 3 ks is up. They actually offset each other, okay? So in 2022, it's kind of a wash between, let's call it, those two programs.

Speaker 2

And then similarly, we get combat rescue helicopter upside, maybe $100,000,000 but probably VH will The plan is VH92A production down about $100,000,000 to $150,000,000 A offset. You might Remember that we were part of the Australia Future Conventional Sub program. Well, that's gotten deferred into nuclear submarine propulsion option and we're going to compete for that, but it's going to be a while before that kicks in. So there's another 150. So there are puts and takes on every In every VA, if you will.

Speaker 2

And it's part of again, new administration, some changes in priorities, changes in alliances, I think they all settle out to the good, but it's going to take a couple of years to get through all that kind of maneuvering. And we're Really double down or triple down on returning cash to shareholders because we've got it. And the other thing I'd say, George, real quick To add on to something that John said earlier, we are voluntarily continuing our acceleration of payments to supply chain. This is Something for the good of the industry, for the good of the customer. And we want to contribute, as all of us are in our own ways in this country, To recovering from COVID and again when as John said, when COVID subsides, we will get that cash flow number back to where you thought it was going to be in the 1st place.

Speaker 2

So just a couple of color commentaries on there because I think you guys are asking some really good questions.

Operator

And next we go to Pete Skibitski with Alembic Global. Please go ahead.

Speaker 9

Yes, good morning. Hey guys, can you give us greater insight into the supply chain because it seems like We're in a period here where cash flow terms are unusually generous. So it's hard to understand Why they'd be in such financial strain? Is it all related to things like just labor availability or COVID mandates or Semiconductor shortages. Can you give us greater insight as to why the supply chain is in Such dire straits given the cash flow terms that they've been operating under.

Speaker 4

Yes. Hey, Pete, good question. And I think a large part of the impact that our supply chain is facing are in our suppliers that are dual use. I mean they're supplying to both commercial aerospace And defense, so if we're looking at parts of the supply chain that are strictly defense, they're probably not nearly as stressed financially call is being recorded. As our dual use suppliers, people that are they'll make landing gear for us and they'll make landing gear for commercial aircraft, they make brakes.

Speaker 4

And Those are the suppliers that have fixed operating costs that have seen substantial revenue decreases on the commercial supply side that have really caught in to their operating cash flow. And we think call is the right thing to do. We have access to capital. We have access to cash at extremely good rates. We generate a lot of cash flow, it's in as Jim said, it's in the industry's interest, it's in our customers' interest.

Speaker 4

And frankly, there is an element of self preservation here. We need call is our supply chain to be successful for us to be successful. So while it's voluntary, it's not 100% altruistic. I mean, we need to make commitments. We need especially our dual use vendors and partners, our supply chain partners to be successful for the long term.

Operator

And next we'll go to Ron Epstein with Bank of America Securities. Please go ahead.

Speaker 10

Hey, yes, good morning. Maybe if we could just back up the aperture a little bit. Jim, when you first came on board, you talked a lot about a focus on the 21st century warfighter, warfighting connectivity, that sort of thing. Then we shifted a little bit maybe with the acquisition of Rocketdyne. And now here we are.

Speaker 10

It seems like the story has now shifted to this cash return story with no growth. And I think what's on a lot of people's minds is ultimately What is the strategy? I mean, where are you taking the company? And what's the vision here? Because it really seems and I know this maybe call might sound unfair, but it seems a little bit rudderless right now, at least from an outsider's perspective.

Speaker 10

If you could give us some color on that?

Speaker 2

Yes. Well, when you're running a business, Ron, in a dynamic industry with changing government, when government is your major customer, you've got to be agile, right? Call is now the first thing you mentioned is the long term strategy of the company. We're going to deliver on our programs of record. We're going to drive operational excellence, but we're driving it towards a mission oriented paradigm at the end of the day at Lockheed Martin versus a product paradigm, which we've Yes, been operating under since at least before World War II.

Speaker 2

So that paradigm is still there. We're working towards it. In the meantime, we got to deliver for you all as the shareholders financially and we've got to deliver for our customers operationally. But I am getting, I'd like to think tremendous traction with senior government officials in the U. S.

Speaker 2

And elsewhere that understand that while our industry and their purchase of our products and services over the years has been effective. It's largely effective in the physical world, if you will, The Newtonian world. We're really good at technologies like hypersonics, space travel, precision weapons, etcetera, those are in the Newtonian world. We're really good at that as an industry and our customer knows how to buy that stuff. What we're not as good as we need to be in the defense industry is merging that excellence in the physical world that we can bring to National Defense, but merging that with the developments the accelerated developments in the digital world call is by companies that have specialized in things like 5 gs and AI and distributed computing and networking because if we merge those two things together in the ways that we're forecasting and that we're building technology roadmaps to do.

Speaker 2

We will increase the effectiveness of our current set of platforms In a faster and more robust way than can be done just using the physical attributes and the physical world technologies. We're going to keep doing all that, but we can actually turn on an afterburner for mission capability for our customers call is by accelerating those digital technologies into our space and that is our strategy. The benefit of that is in addition to having a more effective national defense at a relatively efficient cost is that it will make our platforms more attractive than relative to other OEMs platforms because we intend to build the architecture first with Pathfinders with some of our platforms and bring in others as We get some success. So that is the strategy of the company. It has not changed an iota, but our capital allocation strategies had to change because dynamic situation that we find ourselves in externally.

Speaker 2

And our M and A approach has had to evolve because There's not that much supply out there in our industry as far as acquisition candidates of any scale, and a regulatory environment is also shifting a bit. So we're shifting with it and we're saying, okay, we still got our baseline strategy 21st Century Warfare is where we need to end up down the road call is with our customers. We wanted to get there partly through acquisition like Aerojet Rocketdyne and i3 to get the technologies mainly in The physical world that we need to move those things forward, but the M and A window isn't that open right now for valuation, availability and regulatory regime. So we are just being And doing the things that you have to do when you're running an actual business in the real world, which is being agile. The one thing I want to add to that because there may be some misconception about Ron, thank you for the question by the way to open this up.

Speaker 2

I want to make absolutely clear that our M and A approach does not and has not call included the acquisition of major commercial technology or telecom companies. We're not trying to become that. We want to use their IP, their people to accelerate call is that kind of technology, that digital technology into our world. So our approach is to partner with industry leaders in those spaces via commercial agreements, licensing, joint teaming and participation standards bodies to accelerate those capabilities into our technology roadmaps. We have no intention of acquiring or merging with any of those major commercial sector companies.

Speaker 2

So yes, you got to be dynamic and agile when you run a business that's this big in the real world and That's what we're up to and we still have our target being the pathfinder towards 21st Century National Defense.

Speaker 4

Hey, and Ron, this is John. Just to pile on to what Jim said, he's done a very good job of articulating the strategy from an external perspective. But as a guy that's been with this company for over 30 years, what I most See and resonate with is how Jim's actively changing the culture across Lockheed Martin internally to embrace Any kind of innovative technology despite where they come from, we've got a lot of really bright creative scientists and engineers, but we don't have to invent the solution to every single problem. And historically, we've struggled with some level of not invented here, which This probably may come as no surprise to some of you. So what Jim has been stressing and our team is getting is we need to identify and partner with whoever does have the best solution in an industry agnostic manner.

Speaker 4

And I think we're doing a pretty good job of that in our Ventures investment fund where we're going to start ups and seeing the art of the possible, we're starting to get pull demand from the business areas for some of these technologies, Which I personally view is a huge step in the right direction. And he's driving that mindset, the openness to technology across the entire R and D and Engineering Community. So I haven't seen a change and I appreciate the direction from an internal perspective.

Operator

Call is open. Thanks.

Speaker 4

I think certainly the markets looking at the 2022 cash cut in particular. And John, I just want to clarify something. So the $1,500,000,000 prior advances that you mentioned you hadn't planned on, are those net from in other words, are you suggesting that the prior guidance Included 0, now it's $1,500,000,000 and so pro form a the prior the move from the prior guidance is up operationally $29,900,000,000 Yes. So then is $23,900,000,000 So let me make sure we're tracking. The prior guide was 8,900,000,009.

Speaker 4

Today we're doing 8,300,000,000 and 8,400,000,000 And in that $8,400,000,000 is $1,500,000,000 that was not there. So we're up $300,000,000 I'm telling you call today, our $8,400,000 is going to be higher will be higher than $8,400,000 in 2023. Depending on how much we still have to accelerate in 2023, that number can be Anywhere from $1,000,000,000 higher to $100,000,000 higher or $200,000,000 higher. So the punch line is if you think about the 2 years 2021 2022 were ahead Depending on the outcome of where COVID is, any either 2022 or 2023, It could be equal to or slightly behind the prior multiyear guidance, if that makes sense. It does, but I guess the other question is these are advances, so they presumably rotate back to you.

Speaker 4

So that's why I'm asking about 23 and beyond would be materially higher than 1.

Speaker 2

So you don't get the full benefit of $1,500,000,000 because there's a rolling a roll off, If you will, quarter to quarter as you go through the year. So there's some subset of that, as John is saying. Depending when the music stops, we'll be able to then elevate The cash flow we report because we didn't do a quarter or 2 of the typical flow throughs to the supply chain.

Speaker 4

Right. Hey, so Not

Speaker 2

going to be the whole year.

Speaker 4

Yes. So just to make sure, we're on 100% the same baseline. The old guidance was 8.9%, 9.0% and 9.1%. Today, let's just use as a baseline 8.3, 8.4 and 8.5, that's down $1,800,000,000 If we're at 8.5, call, we've got over $1,000,000,000 of assumed advances at the end of 2023.

Speaker 2

So you

Speaker 4

could say notionally, where we're sitting here today Over the 3 year period, we're down $800,000,000 and some of that is driven by what I have now assumed in terms of We have an internal term. It's funding that we or authorization spending we do in conference call is based on history, there is a high likelihood that some of these programs when they shift from development to production, the customer funding profiles aren't going to align with need dates. We are anticipating that we will be carrying A substantial amount of cost associated with that transition. Okay. I'll stick to one.

Speaker 4

Thanks.

Operator

Our next question is from Cai von Rumohr with Cowen. Please go ahead.

Speaker 11

Yes. Thank you very much. So, Jim, I'm a little confused with the kind of capital deployment. You talk about spending an incremental amount in terms of IR and D, you're going to increase the dividend, You have less CAS recovery. You talk of $6,600,000,000 of stock repurchase, but if you do AJRD, You can't do any stock repurchase unless you really balloon up the balance sheet.

Speaker 11

So what kind of a balance sheet And net debt to EBITDA ratio, are you looking for over this period?

Speaker 4

Hey, Cai, it's John. I'll take that. If you look at our operating cash flow and free cash flow, our net debt retirements over the I'll stick to the first 3 years of the plan. Our excess cash balances would allow us to do the $6,000,000,000 we're talking about and still have enough liquidity to run the business. So that's point 1.

Speaker 4

The $6,000,000,000 is just deploying what would otherwise have been in my bank account earning 25 basis points. That's 0.1. 0.2 with AJRD, our original expectation was we would probably finance, call it $3,000,000,000 of the $4,500,000,000 and used cash for the other $1,500,000,000 I'm leaning now towards, especially given how low financing rates are, maybe financing the entire acquisition. But kind of more broadly, the way I think about acquisitions, and I know Jim and I are absolutely in 100% violent agreement on this. If you can find M and A that has the right operational fit, the right culture fit and the right strategic fit, M and A pays for itself.

Speaker 4

I mean it's free. You have to finance them upfront. But if it's a good deal, you're going to get your money back very quickly. So I view, like Jim does, M and A is not a drain on your balance sheet. Our balance sheet, as you know, is A.

Speaker 4

Call is being recorded. Our metrics would support a higher rating or A- for the 2 that do use the A- scale. Conversations I've been having was it's hard to justify why we're in A- instead of a flat A. The punch line is we've got a tremendous amount

Speaker 2

call is now open.

Speaker 4

If, as Jim talked about, the disciplined and dynamic capital allocation process says, We need to put additional resources in here, there or wherever. We're going to have the ability to do that.

Speaker 2

From a leverage perspective, we've got upside. I mean, we're We've got a strong balance sheet. I will try to emphasize in the prepared remarks that we see call is being recorded. Tremendous value and share repurchase at these pricing levels. We will go to the debt the capital markets to get the resources call is to make the smartest capital allocation at that point in time and we'll manage the leverage as we go.

Speaker 2

And we can do it all. Everything you said, we can do it all and maintain a reasonable leverage ratio, I believe, and a strong press release, I also and John also believes.

Operator

Our next question is from Noah Poponak with Goldman Sachs. Please go ahead.

Speaker 4

Hello, everyone. Hi, Noah.

Speaker 12

I guess I'm still trying to better understand how much of the growth projection shortfall versus what the market was looking for is end market versus Lockheed programs. And I know, Jim, you kind of talked about there being multiple puts and takes. But ex AWE, I guess you're saying a few years of flat revenue to up low single digit growth. What do you assume are you assuming that's what outlays are doing, putting the 2022 authorization specifically aside? Is that what you're assuming outlays are doing?

Speaker 12

Are you assuming You're worse than outlays. And then specifically at MFC, what's happened at MFC? Because at one point the growth rate was high, The company was saying good growth was sustainable, that there was really just capital and supply constraints. Now it's down in the quarter and you're saying it's down next year. So that seems to have changed a decent amount.

Speaker 4

Yes. Hey Noah, it's John. I'll Take the question. I would characterize the 2021 to 2022 headwinds as maybe being unique to us in some regards, although companies have a lot of exposure or had a lot of exposure to Afghanistan, for example. They may have similar headwinds, but I'd say the 2021 to 2022 headwinds are maybe confined to us, but the out year growth, I think when I looked at the last track on the President's budget, the growth rate was like 2% a year out for government fiscal year 2023, 20 24, 20 25 and out.

Speaker 4

I see that as a center point. Again, if we're able though to prevail call is being recorded in competitions, I see a path for us to grow faster than that rate. We need to perform on our programs. We need to deliver helicopters and airplanes on our committed schedules. And if we do that, I see upside to the 2% growth that's in the President's budget.

Speaker 2

On MSC more specifically, there, the PAC-three production is going to go up and we've been investing in that capacity as you know. But it's going to go up a couple of $100,000,000 And then again, If you do puts and takes that special ops logistics support program itself was $200,000 In MFC, just that one program takes away all the PAC-three growth year over year into 2022. And then we had probably not as well known, but for MFC a significant cancellation in the U. K. There's a Warrior armored vehicle program That was canceled by the U.

Speaker 2

K. Government and that was another $100,000,000 downdraft. And then that is sort of tailing off a little bit too now in production rates, Not much but another $100,000,000 So you really have to dig into the details of each VA to see why 2021, 2022, 2023 effects are happening, but we really are focusing on 2023 plus so to beyond 2023 because all of these programmatic effects will be known by then. We've got those 4 big areas where we And then we'll have some of those new starts that we if the competition stay on time, we may know some decisions in those too. So Yes, there's going to be some puts and takes at Lockheed Martin specifically the next couple of years, but we're positioning ourselves to weather this period And get through with a lower share count, materially I think lower share count by the end of it and then a growth vector that has An inclination to it post-twenty 23.

Speaker 2

And that's really our overall financial strategy is to work the share count, reward shareholders along the way and then an inflection point in growth is what we're aiming for. That's our goal.

Operator

Our next question is from Sheila Kahyaoglu with Jefferies. Please go ahead.

Speaker 13

Good morning, guys, and thank you for including me.

Speaker 2

Thanks, Sheila.

Speaker 13

Maybe just to follow-up on Noah's question, if we could talk about The shorter term 20222023 because I do think that's what investors are focused on. What could be the potential element of upside surprise? You guys mentioned $8,500,000,000 of the portfolio is focused on growing programs like CH-fifty 3 ks and PAC-three. Is that what we would look to

Speaker 3

or are there other elements that

Speaker 13

come in? Yes. Thanks. Comments that come in.

Speaker 4

Yes. Thanks, Sheila. I think it's Growth and opportunities across the big four categories that Jim has articulated, A lot of our potential upside in 2023 is going to come from programs that are right now in operational testing, Assuming they're able to achieve success through that those test programs, they're going to migrate In the production, that's in the period where you still have an overlap between development and production, that's where you're going to start seeing Some bulge and that kind of transition ties into the discussion, probably to extended discussion I had with Miles about if you look out to 2023 or you cum the 3 years, why are you slightly down from the last guide? Yes. I think we're going to be successful.

Speaker 4

We're going to need to bridge those programs to maintain their critical schedule. So we're going to carry A financial backstop against them. But there is absolutely no doubt the growth is going to come out of hypersonics, classified and growth in the program is a record. I mean Jim mentioned PAC-three growing $200,000,000 going from 2021 to 2022. In 2021, we're going to deliver 3.50 rounds.

Speaker 4

We're going to be delivering 500 in 2023 and 550 in 2025 pack. So PAC-three growth is going to be very strong in that period of time and CH-fifty 3 ks really starts levering. And if we When we prevail on the future vertical lift programs, you will see an inflection point as well. Okay.

Speaker 13

Thank you, John.

Speaker 2

You're welcome, Sheila.

Operator

Next, we'll go to Doug Harned with Bernstein. Please go ahead.

Speaker 3

Call is

Speaker 6

open. Good morning. Thank you. I wanted to really go to 2 issues that I think are related. In talking about strategy and in the past we've talked about JADC2 and a lot of the things you're thinking about long term, Which I think of as important as platforms may be is much more about systems, processing, software, sensors, comms and so forth and integration.

Speaker 6

But when I look at where F-thirty 5 is today, one of the big challenges there is And integration program and it's been Tech Refresh 3 that I think by any measure has not gone the way it has been hoped. Can you talk about where Tech Refresh 3, the move to Block 4 stands today? What risks that May pose for F-thirty five rates going forward. But then also if you extrapolate that and if I'm to think about I'm doing broader systems architectures across domains. How do I get confident that The integration capabilities you have are the best to deliver on that.

Speaker 6

So it's the combination of both the F-thirty five situation And taking that to a long term strategy.

Speaker 2

Sure, Doug. It's Jim. So I'll start with TR3, which is I'd suggest a microcosm of the larger picture, but an important one. TR3 gives you and I supply these jets, Similar ones at least. It gives you a better cockpit display, more processing for data in the airplane And more data storage in the airplane, all good things for 21st Century Warfare, although they are not essential To beginning the journey into networking that jet more closely with other systems and other platforms.

Speaker 2

So We are doing those 2 things in parallel because I think they're independent. TR3 has also been delayed a bit. We're working with Jay Poe, we feel we're on a common schedule now. We've got some significant supply chain issues That we've had to embed our own engineers into our suppliers to try to get them to perform. We're counting on them.

Speaker 2

That's important. But it's not going to deter or defer us from our goal of really developing the F-thirty five platform to be the aeronautic cornerstone of our architecture for 21st Century Warfare. Because, yes, once TR3 is in, It will take another leapfrog up in data storage and data processing capabilities and networking capabilities, which we will add. But we're already demonstrating how to do that conference call is with a hybrid base station that we actually fly in a U-two that provides that connectivity today Deferential or coterminate they often be coterminate. We will get both of these jobs done.

Speaker 2

Conference call is open. And in the broader program here, what we've, I think, derived by working with our government customers so far and understanding contracts and things is that There won't be an overarching JAD C2 of any kind. What there will be is, in reality, in this business question is, I think, in our customer construct is that a technology road map and this has been developed more since maybe the last time you and I talked about this, Doug, But it's going to be a technology road map, which is platform by platform connectivity using an open architecture set of standards and protocols that the whole industry can share. And we're going to be doing that one stage at a time. And What I want to do and I have to talk to our customers about at the most senior level is to provide every 6 to 12 months a mission capability call is by implementing this technology roadmap mission by mission.

Speaker 2

Now we've got 14 missions and we've got 14 technologies coincidentally that we have completed 3 of those missions, which happened to be counter air, surface warfare and integrated air and missile defense. We're showing customers those roadmaps and getting feedback on what platforms we should be tying together first and getting those sensors decision making command and control systems and actual effectors connected in the most optimal way every 6 to 12 months. So we're moving out on both fronts. TR3 is, again, associated but not essential for moving out on the 21st Century Warfare front.

Speaker 1

Thank you, John. I think we've got a little over our normal time, but there's been outstanding conversation today. I think at this time, I'll turn it over to Jim for closing remarks.

Speaker 2

Sure, great. As I conclude the call today, I wanted to end by reinforcing our commitment to delivering long term value to our shareholders here.

Speaker 3

Call is now open. While using our strong cash flow and robust balance sheet to do so, we

Speaker 2

are not shy about leveraging. We're not shy about Moving out with speed and with scale, as we've talked about. Similarly, and again, along the way, we're going to call is today's call. Work hard and invest to advance our customers' important missions along the way. Those numbers that John threw around $2,000,000,000 of CapEx and $1,500,000,000 of IR and D.

Speaker 2

They're not incremental. They are up from our kind of recent history, but they are not an incremental But they are not an incremental $2,000,000,000 an incremental $1,500,000,000 just to be clear on that. So I just want to make sure everybody knows our approach here, we're going to be positioning ourselves for a growth inflection that we hope and expect to see a couple of years down the road. And by doing the share repurchase at the scale we're discussing and the timeframe we're looking at, the per share valuation value of that growth inflection should be amplified. That's our goal here.

Speaker 2

And thanks again to all of you for joining us on this call today. We look forward to speaking with you on our next earnings call in January.

Operator

Call. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
Lockheed Martin Q3 2021
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